Pease v. Cole

• Decision Date: 28 August 1885
• Citation: 22 A. 681,53 Conn. 53
• Parties: PEASE v. COLE.
• Court: Connecticut Supreme Court

22 A. 681

53 Conn. 53

PEASE

v. COLE.²

Supreme Court of Errors of Connecticut.

Aug. 28, 1885.

Appeal from court of common pleas, Hartford county.

Action by Ernest M. Pease against Charles H. Cole and Daniel McCarthy on a note executed by McCarthy in the firm name of defendants to J. B. McCarthy, father of Daniel McCarthy, and by him indorsed to plaintiff. Judgment for plaintiff, and defendant Cole appeals. Reversed.

G. G. Sill and H. S. Hanford, for appellant.

L. E. Stanton and S. F. Jones, for appellee.

LOOMIS, J. The question involved in this case is whether one member of a copartnership formed for the purpose of conducting a theater in Hartford could, under the circumstances mentioned in the finding, bind the other member by executing a negotiable promissory note in the name of the firm for money borrowed. The finding, in terms, excludes all express authority of the other partner, and even all knowledge of the matter on his part. So that any conclusion that the note is the note of the firm, rather than of the member executing it, must necessarily rest on an authority to be implied. But here, again, the facts found so circumscribe the range of inquiry as to exclude all the ordinary sources of such authority. The circumstances from which an authority may be implied are identical with those involved in a question of ordinary agency, for each partner is regarded as the accredited agent of the rest. In many cases the decisive fact is found in the customary course of dealing; but not so here, for it is found that the note in question was the only note ever given in the name of the firm. The copartnership first commenced business in August, 1883, and on the 24th of the same month the note in suit was given. There was therefore very little time for a course of conduct or usage of any sort to grow up, giving any apparent authority. The finding traces the money borrowed only into the hands of McCarthy, the partner who signed the firm name, and no fact appears showing, directly or presumptively, that the act was necessary for any of the purposes of the partnership. The only remaining source from which an authority may be derived by implication must be sought in the nature and scope of the partnership and in the nature of the act; and here, if we examine the legal principles that are applicable, it will be found, not only that all such implication is wanting, but that the presumption is directly against the authority assumed. The weight of authority in the United States, and the uniform tenor of the authorities in England, will be found to establish a controlling distinction in respect to implied authority between commercial or trading and non-trading partnerships. Story, Partn. (6th Ed.) § 102a; 1 Lindl. Partn. (4th Ed., by Ewell,) top p.266, and note 1, and cases there cited; 1 Colly. Partn. 648, 658; Mete. Cont. 121, and eases cited in the notes.

In a commercial partnership, each acting partner is its general agent, with implied, authority to act for the firm in all matters within the scope of its business; and the presumption of law is that all commercial paper which bears the signature of the firm, executed by one of the partners, ia the paper of the partnership, for the reason that the giving of such notes would be within the usual course of mercantile transactions. But when we pass to nontrading partnerships the doctrine of general agency does not apply, and there is no presumption of authority to support the act of one partner. Hence, in order to subject the firm upon a bill or note executed by one partner in its name, a course of conduct, or usage, or other facts sufficient, to warrant the conclusion that the acting partner had been invested by his copartners with the requisite authority, must appear, or that the firm has ratified the act by receiving the benefit of it. That the partnership in question belongs to the non-trading class seems so obvious as to need no discussion. The brief in behalf of the defendant Cole cites many cases, and. gives a long list of pursuits and professions which those cases establish as of the non-trading class, and, although the conduct of a theater is not there mentioned, yet the analogies manifestly include it. To show the existence of the distinction contended for, and its application, we select from a multitude of authorities the following, in addition to those previously referred to:

In Judge v. Braswell, 13 Bush, 67, the defendants were partners under an agreement to engage in mining business upon lands then leased or which might be thereafter acquired. One of the members of the firm purchased, without the others' consent, and took conveyances of, mining land in the name of the firm, and gave the bills of the firm therefor. In an action by the payee of the bills against the firm, a defense was made by the other partners that the purchase was without their consent or ratification, and in the plea they renounced all claim to the lands purchased. The court held that the firm was not liable on the bills, saying that the power of one partner to bind his copartners rests alone on the usage of merchants, and does not amount to a rule of law in any other than commercial partnerships. In non-commercial partnerships, one who seeks to hold the firm bound upon a contract made by a single member must be able to show, either express authority, or that such is the customary usage of the particular branch of business in which the firm is engaged, or such facts as will warrant the conclusion that the partner had been invested by his copartners with the requisite authority.

In Hedley v. Brninbridge, 3 Q. B. 316, the defendants were attorneys in partnership, and one of the partners gave a note in the name of the firm to the plaintiffs for the balance of advancements made to one partner who was acting in behalf of the firm. The advances were to belaid out on mortgage by the firm. Lord Denman, C. J., in giving the opinion, said: "No doubt a debt was due from the firm; but it does not follow that one partner had authority to give a promissory note for that debt. Partners in trade have authority, as regards third persons, to bind the firm by bills of exchange, for it is the usual course of mercantile transactions so to do; and this authority is by the custom and law of merchants, which is part of the general law of the land. But the same reason aces not apply to other partnerships. There is no custom or usage that attorneys should be parties to negotiable instruments, nor is it necessary for the purposes of their business. * * * Upon the whole, we think that the implied authority is confined to partners in trade."

In Dickinson v. Valpy, 10 Barn. & C. 128, the plaintiff was an indorsee for value of a bill of exchange drawn and accepted in the name of a mining partnership by order of its regular directors. It was held incumbent on the plaintiff to prove that the directors had authority to bind the company, and that it was necessary, for the purpose of carrying on the business of the company, or usual for other similar mining companies, to draw or accept bills of exchange. Opinions were given by Lord Tenterden, C. J., and Judges Bayley, Littledale, and Parke, and the same distinction was made as in other cases between trading and non-trading partnerships. See, also, Greenslade v. Dower, 7 Barn. & C. 635.

In Levy v. Pyne, tried before Baron Anderson, 1 Car. & M. 453, it was held that, "if a bill of exchange or promissory note be drawn, accepted, or indorsed by one of two persons who are partners in a business which is not a trade, (e. g., as attorneys,) in the name of the firm, * ** the plaintiff must give evidence of the authority of the other partner to draw, accept, or indorse in the name of the firm; but, in the case of a commercial firm, this is not necessary, as there is a general authority." See, also, Rickards v. Bennett, 1 Barn. & C. 223; Garland v. Jacomb, L. R. 8 Exeh. 218.

In Smith v. Sloan, 37 Wis. 285, the court, by Lyon, J., after an able and exhaustive review of the authorities, adopted the following proposition as fully sustained: "We gather from all the authorities that the distinction between a trading and non-trading partnership, in respect to the power of a partner to bind his copartner by negotiable instruments, is not limited to a mere presumption of such authority in one case, and the absence of such presumption in the other, as the learned counsel for the plaintiff argued; but we think, and must so hold, that one partner in a non-trading partnership cannot bind his copartner by bill or note, drawn, accepted, or indorsed by him in the name of the firm, not even for a debt which the firm owes, unless he have express authority therefor from his copartner, or unless the giving of such instruments is necessary to the carrying on of the firm business, or is usual in similar partnerships; and the burden is upon the holder of the note, who sues upon it, to prove such authority, necessity, or usage."

In Ulery v. Ginrich, 57 Ill. 531, the partnership was for farming purposes, and the note in suit was given by one in the name of the firm for money borrowed. It was held to be a non-trading firm; and the same principles were adopted in the cases previously cited. In Hunt v. Chapin, 6 Lans.139, it was held. Miller, P. J., giving the opinion, that the rule which authorizes one member of a copartnership to bind the firm is only applicable to business of a trading nature, and has no application to partnerships for agricultural purposes, or others of a similar character. See, also, Kimbro v. Bullitt, 22 How. 256; Graves v. Kellenberger, 51 Ind. 66; Bank v. Snyder, 10 Mo. App. 211.

In Chalmers' Digest of the Law of Bills of Exchange, Promissory Notes, and Cheques, (2d Ed. pp. 68, 69,) the following propositions are laid down as well-settled rules: "Art. 77. A partner in a trading firm has prima facie authority to bind the firm by drawing, indorsing, or accepting bills in the...